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Remaking Economic Development TH E MARKETS A ND CI VI CS OF CO N T I N UO US G R OW T H A N D P R OSPERI TY


Why remake economic development? Embracing a broader vision of economic development is an economic and fiscal imperative. Our

R E MA K I N G ECO NOM I C D EV ELOP M ENT

7


Transparent and inclusive Transparency and inclusion are essential to building the trust required for on-going collaboration and partnership at the scale of the region. And regions pursuing deep prosperity have learned that it requires deliberate steps to ensure that regional efforts deliver inclusive outcomes. A case study of Minneapolis-St. Paul shows the evolution of its significant capacity for civic leadership and the widening circle of partners involved to focus on making it more equitable and inclusive. Over the last decade, major stakeholder groups in different configurations have built stronger regional collaboration, founding a new economic development entity, Greater MSP; piloting new approaches to skills building; and coming together to ensure that transit-oriented development benefited low-income communities. At the same time, seminal reports on the region’s economic performance highlighted significant racial and income disparities.53 Diverse stakeholders, such as the Northside Funders Collaborative, along with the Itasca Project CEO group, and Greater MSP, have

R E MA K I N G ECO NOM I C D EV ELOP M ENT

coalesced behind a vision for a more competitive, equitable, and sustainable region. Its story illustrates the path taken by a nimble, high-performing region with significant institutional capacity and an increasingly shared commitment to more inclusive growth. In most regions, ensuring inclusiveness requires tailoring strategies to specific sub-regions or populations, including disadvantaged and minority communities, as is happening in Milwaukee and the Greater Chatham area on the south side of Chicago for example. In the case of Syracuse, an institutional approach evolved from a neighborhood-based skills initiative to a recent change in the mission and structure of its lead economic development entity, the CenterState Corporation for Economic Opportunity. The work to put a region on a higher growth trajectory never stops. Regional leaders must balance tangible and visible progress against shorter-term goals with the recognition that the vision is long term, requiring constant adaptation as conditions and leadership changes. It also remains a work in progress, with much exploration and experimentation still to be done to deliver new insights, new techniques, new finance tools, and new business models to get the civics right.

17


scattered technology sectors. Through interviews with firms, it was discovered that those technology firms shared certain capabilities related to precision sensors, decision support, and data analytics, including specialized technologies that emerged from the region’s legacy as a center for military research and operations related to unmanned aerial aircraft. The result was the identification of an emerging cluster called “Data to Decisions” embedded across more than 50 firms involved in technology applications for industries as diverse as aerospace, cybersecurity, environmental management, and smart appliances.59 The region’s comprehensive growth strategies, including the D2D cluster strategy, recently won a $500 million Upstate Revitalization Initiative award from the state of New York and, separately, early designation as a testing site for civilian applications of unmanned aerial aircraft technology.60 Another hallmark of success in mobilizing clusters comes from regions that have the capacity to organize the mix of firms, research institutions, and other related entities on an on-going basis. The most effective efforts are not focused as much on policy advocacy as on programs that enable firms and institutions to forge relationships and develop collaborations to solve common market challenges. For more than a decade, leaders involved in the life sciences cluster in Indianapolis have deployed a portfolio of strategies under the umbrella of “BioCrossroads” including supports for entrepreneurs, connecting startups to capital, and nurturing business relationships across the cluster. Their efforts have contributed to the formation of over 300 companies and significant export growth, among other achievements.61

top employers such as GE Appliances and Lighting and Toyota Motor Manufacturing, Kentucky, Inc., smaller firms, and the universities of Louisville and Kentucky, to focus on strengthening the regional ecosystem for manufacturing. As a result of relationships built around BEAM, leading firms formed collaborations to invest in employer-sponsored apprenticeships. To spur new product innovation, GE also founded FirstBuild, a research and development lab for makers and entrepreneurs operating in partnership with the University of Louisville. Throughout the country, governors have launched new economic development initiatives that empower and fund regional leadership—and align state policies and programs behind regional assets, including major investments like those in New York. In Tennessee, Colorado, and Oregon, state leaders have taken special aim at advanced industries with initiatives in innovation, skills development, and supporting regions to move up the value chain and compete globally. States are making community colleges tuition-free, supporting sector alignment in workforce development, targeting STEM skills, and vouchers for small firms to access R&D and technology services. Business attraction and real estate development can fit in this model— when used strategically to enhance or fill out key clusters or enrich the industrial commons, as in bold initiatives such as Applied Sciences in New York City, New York

As a result of an unprecedented partnership between mayors in Louisville and Lexington to elevate the importance of advanced manufacturing in their oftencompeting regions, institutions in that cluster began to forge their own solutions. The Bluegrass Economic Advancement Movement (BEAM) brought together

R E MA K I N G ECO NOM I C D EV ELOP M ENT

23


Endnotes 1. Richard Shearer et al., “Metro Monitor: Tracking Growth, Prosperity,

Older Industrial Areas (Brookings Institution Press, 2008). Fur-

and Inclusion in the 100 Largest U.S. Metropolitan Areas” ((Wash-

thermore, one study by Timothy Bartik found that of this amount,

ington: Brookings Institution, January 28, 2016).

$21 billion came from local governments in the form of tax breaks

2. See Economic Development Quarterly: The Journal of American

and subsidies: Timothy J. Bartik, “Local Economic Development

Economic Revitalization, February 1987–present. See also Nancey

Policies” (UpJohn Institute Working Papers, 2003). Per-capita 2003

Green Leigh and Edward J. Blakely, “Chapter 3. Concepts and The-

figures adjusted for 2014 population and inflation.

ory of Local Economic Development,” in Planning Local Economic Development Theory and Practice (Thousand Oaks, California: SAGE Publications, 2013), and Michael H. Best, “Chapter 1 Introduction,” in The New Competitive Advantage: The Renewal of American Industry (Oxford: Oxford University Press, 2001). 3. Thanks to our work on the Brookings-Rockefeller Project on State and Metropolitan Innovation and the Global Cities Initiative: A Joint Project of Brookings and JPMorgan Chase, our program has had the benefit of helping leaders in cities and metro areas design and execute a broad range of data-driven, actionable economic development strategies, including global trade and investment efforts. Those collaborations, with more than two dozen cities and metro areas, and their lessons are the source of inspiration for this paper. 4. For a general overview, see Jason Furman, “The Ingredients for Getting the Middle Class Back on Track,” Wall Street Journal, March 10, 2015; and Tyler Cowen, The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, 2011. For a macroeconomic perspective, see Lawrence H Summers, “U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound,” Business Economics 49, no. 2 (April 2014): 65–73. For the business perspective, see Jan V. Rivkin, Karen G. Mills, and Michael E. Porter, “The Challenge of Shared Prosperity” (Harvard Business School, 2015). For a diagnosis of policy issues, see Joseph E. Stiglitz, “Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity” (Roosevelt Institute, 2015). 5. Ian Hathaway and Robert E. Litan, “Declining Business Dynamism in the United States: A Look at States and Metros” (Brookings Institution, May 5, 2014). 6. Richard Shearer et al., “Metro Monitor.” 7. Alan Berube and Natalie Holmes, “City and Metropolitan Inequality on the Rise, Driven by Declining Incomes” (Brookings Institution, January 14, 2016). 8. Elizabeth Kneebone, “The Growth and Spread of Concentrated Poverty, 2000 to 2008-2012” (Brookings Institution, July 31, 2014). 9. Bruce Katz, “How Washington Made Itself Irrelevant,” Washington Post, December 4, 2014. 10. Two studies provide estimates of state and local economic development incentives, including the review of literature on their limitations. See Edward Alden and Rebecca Strauss, “Curtailing the Subsidy War Within the United States,” Renewing America (Council on Foreign Relations, May 12, 2014). Alden and Strauss cite a figure from the following New York Times analysis: Louise Story, Tiff Fehr, and Derek Watkins, “United States of Subsidies: Explore Government Subsidies,” New York Times, December 1, 2012, http://www. nytimes.com/interactive/2012/12/01/us/government-incentives.html. See also Jennifer S. Vey and Richard M. McGahey, eds., Retooling for Growth: Building a 21st Century Economy in America’s

R E MA K I N G ECO NOM I C D EV ELOP M ENT

29


telephone 202.797.6139 fax 202.797.2965 web site www.brookings.edu/metro


Why remake economic development? Embracing a broader vision of economic development is an economic and fiscal imperative. Our

R E MA K I N G ECO NOM I C D EV ELOP M ENT

7


Transparent and inclusive Transparency and inclusion are essential to building the trust required for on-going collaboration and partnership at the scale of the region. And regions pursuing deep prosperity have learned that it requires deliberate steps to ensure that regional efforts deliver inclusive outcomes. A case study of Minneapolis-St. Paul shows the evolution of its significant capacity for civic leadership and the widening circle of partners involved to focus on making it more equitable and inclusive. Over the last decade, major stakeholder groups in different configurations have built stronger regional collaboration, founding a new economic development entity, Greater MSP; piloting new approaches to skills building; and coming together to ensure that transit-oriented development benefited low-income communities. At the same time, seminal reports on the region’s economic performance highlighted significant racial and income disparities.53 Diverse stakeholders, such as the Northside Funders Collaborative, along with the Itasca Project CEO group, and Greater MSP, have

R E MA K I N G ECO NOM I C D EV ELOP M ENT

coalesced behind a vision for a more competitive, equitable, and sustainable region. Its story illustrates the path taken by a nimble, high-performing region with significant institutional capacity and an increasingly shared commitment to more inclusive growth. In most regions, ensuring inclusiveness requires tailoring strategies to specific sub-regions or populations, including disadvantaged and minority communities, as is happening in Milwaukee and the Greater Chatham area on the south side of Chicago for example. In the case of Syracuse, an institutional approach evolved from a neighborhood-based skills initiative to a recent change in the mission and structure of its lead economic development entity, the CenterState Corporation for Economic Opportunity. The work to put a region on a higher growth trajectory never stops. Regional leaders must balance tangible and visible progress against shorter-term goals with the recognition that the vision is long term, requiring constant adaptation as conditions and leadership changes. It also remains a work in progress, with much exploration and experimentation still to be done to deliver new insights, new techniques, new finance tools, and new business models to get the civics right.

17


scattered technology sectors. Through interviews with firms, it was discovered that those technology firms shared certain capabilities related to precision sensors, decision support, and data analytics, including specialized technologies that emerged from the region’s legacy as a center for military research and operations related to unmanned aerial aircraft. The result was the identification of an emerging cluster called “Data to Decisions” embedded across more than 50 firms involved in technology applications for industries as diverse as aerospace, cybersecurity, environmental management, and smart appliances.59 The region’s comprehensive growth strategies, including the D2D cluster strategy, recently won a $500 million Upstate Revitalization Initiative award from the state of New York and, separately, early designation as a testing site for civilian applications of unmanned aerial aircraft technology.60 Another hallmark of success in mobilizing clusters comes from regions that have the capacity to organize the mix of firms, research institutions, and other related entities on an on-going basis. The most effective efforts are not focused as much on policy advocacy as on programs that enable firms and institutions to forge relationships and develop collaborations to solve common market challenges. For more than a decade, leaders involved in the life sciences cluster in Indianapolis have deployed a portfolio of strategies under the umbrella of “BioCrossroads” including supports for entrepreneurs, connecting startups to capital, and nurturing business relationships across the cluster. Their efforts have contributed to the formation of over 300 companies and significant export growth, among other achievements.61

top employers such as GE Appliances and Lighting and Toyota Motor Manufacturing, Kentucky, Inc., smaller firms, and the universities of Louisville and Kentucky, to focus on strengthening the regional ecosystem for manufacturing. As a result of relationships built around BEAM, leading firms formed collaborations to invest in employer-sponsored apprenticeships. To spur new product innovation, GE also founded FirstBuild, a research and development lab for makers and entrepreneurs operating in partnership with the University of Louisville. Throughout the country, governors have launched new economic development initiatives that empower and fund regional leadership—and align state policies and programs behind regional assets, including major investments like those in New York. In Tennessee, Colorado, and Oregon, state leaders have taken special aim at advanced industries with initiatives in innovation, skills development, and supporting regions to move up the value chain and compete globally. States are making community colleges tuition-free, supporting sector alignment in workforce development, targeting STEM skills, and vouchers for small firms to access R&D and technology services. Business attraction and real estate development can fit in this model— when used strategically to enhance or fill out key clusters or enrich the industrial commons, as in bold initiatives such as Applied Sciences in New York City, New York

As a result of an unprecedented partnership between mayors in Louisville and Lexington to elevate the importance of advanced manufacturing in their oftencompeting regions, institutions in that cluster began to forge their own solutions. The Bluegrass Economic Advancement Movement (BEAM) brought together

R E MA K I N G ECO NOM I C D EV ELOP M ENT

23


Endnotes 1. Richard Shearer et al., “Metro Monitor: Tracking Growth, Prosperity,

Older Industrial Areas (Brookings Institution Press, 2008). Fur-

and Inclusion in the 100 Largest U.S. Metropolitan Areas” ((Wash-

thermore, one study by Timothy Bartik found that of this amount,

ington: Brookings Institution, January 28, 2016).

$21 billion came from local governments in the form of tax breaks

2. See Economic Development Quarterly: The Journal of American

and subsidies: Timothy J. Bartik, “Local Economic Development

Economic Revitalization, February 1987–present. See also Nancey

Policies” (UpJohn Institute Working Papers, 2003). Per-capita 2003

Green Leigh and Edward J. Blakely, “Chapter 3. Concepts and The-

figures adjusted for 2014 population and inflation.

ory of Local Economic Development,” in Planning Local Economic Development Theory and Practice (Thousand Oaks, California: SAGE Publications, 2013), and Michael H. Best, “Chapter 1 Introduction,” in The New Competitive Advantage: The Renewal of American Industry (Oxford: Oxford University Press, 2001). 3. Thanks to our work on the Brookings-Rockefeller Project on State and Metropolitan Innovation and the Global Cities Initiative: A Joint Project of Brookings and JPMorgan Chase, our program has had the benefit of helping leaders in cities and metro areas design and execute a broad range of data-driven, actionable economic development strategies, including global trade and investment efforts. Those collaborations, with more than two dozen cities and metro areas, and their lessons are the source of inspiration for this paper. 4. For a general overview, see Jason Furman, “The Ingredients for Getting the Middle Class Back on Track,” Wall Street Journal, March 10, 2015; and Tyler Cowen, The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, 2011. For a macroeconomic perspective, see Lawrence H Summers, “U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound,” Business Economics 49, no. 2 (April 2014): 65–73. For the business perspective, see Jan V. Rivkin, Karen G. Mills, and Michael E. Porter, “The Challenge of Shared Prosperity” (Harvard Business School, 2015). For a diagnosis of policy issues, see Joseph E. Stiglitz, “Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity” (Roosevelt Institute, 2015). 5. Ian Hathaway and Robert E. Litan, “Declining Business Dynamism in the United States: A Look at States and Metros” (Brookings Institution, May 5, 2014). 6. Richard Shearer et al., “Metro Monitor.” 7. Alan Berube and Natalie Holmes, “City and Metropolitan Inequality on the Rise, Driven by Declining Incomes” (Brookings Institution, January 14, 2016). 8. Elizabeth Kneebone, “The Growth and Spread of Concentrated Poverty, 2000 to 2008-2012” (Brookings Institution, July 31, 2014). 9. Bruce Katz, “How Washington Made Itself Irrelevant,” Washington Post, December 4, 2014. 10. Two studies provide estimates of state and local economic development incentives, including the review of literature on their limitations. See Edward Alden and Rebecca Strauss, “Curtailing the Subsidy War Within the United States,” Renewing America (Council on Foreign Relations, May 12, 2014). Alden and Strauss cite a figure from the following New York Times analysis: Louise Story, Tiff Fehr, and Derek Watkins, “United States of Subsidies: Explore Government Subsidies,” New York Times, December 1, 2012, http://www. nytimes.com/interactive/2012/12/01/us/government-incentives.html. See also Jennifer S. Vey and Richard M. McGahey, eds., Retooling for Growth: Building a 21st Century Economy in America’s

R E MA K I N G ECO NOM I C D EV ELOP M ENT

29


telephone 202.797.6139 fax 202.797.2965 web site www.brookings.edu/metro

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Remaking Economic Development  

Remaking Economic Development  

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